Bert Fish hospital board votes to negotiate with HMA on merger

In a 4-2 vote, the Southeast Volusia Hospital District Board of Commissioners opted to begin exclusive negotiations with Naples-based HMA as opposed to Halifax Health.

SKYLER SWISHERBUSINESS WRITER

EDGEWATER — Bert Fish Medical Center's overseers have chosen to negotiate with Health Management Associates Inc., setting the stage for a for-profit company to take control of the 112-bed public hospital in New Smyrna Beach and potentially shaking up Volusia and Flagler's health care scene. In a 4-2 vote, the Southeast Volusia Hospital District Board of Commissioners opted Tuesday evening to begin exclusive negotiations with Naples-based HMA as opposed to Halifax Health, a 678-bed public hospital system based in Daytona Beach also vying to merge with Bert Fish. HMA, which operates 71 hospitals in 15 states, looks forward to the next steps in the process, said Pete Lawson, the company's executive vice president of development. Once a final arrangement is made, it typically takes about 120 days to close the deal, he said. “We are really looking to the community here to help us develop a plan for an independent Bert Fish Medical Center,” Lawson said. The company has launched a website — bertfish.whyhealthmanagement.com — to introduce the community to HMA and its proposal. If successful, HMA would join a health care market in Volusia and Flagler dominated by Halifax Health and Florida Hospital, which operates five medical centers locally. For taxpayers, HMA says it will no longer need tax support after seven years, opening up the possibility hospital taxes could be abolished entirely in southeast Volusia County. The district will sign a nonbinding letter of intent with HMA so it is not obligated to merge with the company. In coming months, Bert Fish commissioners will iron out details of the proposal in further exclusive negotiations. Halifax Health remains open to working with the Southeast Volusia Hospital District in the event hospital commissioners decide to change direction. “It's not over until it's over,” Halifax Health CEO Jeff Feasel said after the vote, noting the “door is always open.” Halifax Health was allied with Bert Fish from 1997 to 2004 but the union fell apart amid political squabbles. HMA supporters on the Southeast Volusia board said the company's deep pockets, ability to grow the hospital's network of referring physicians and track record of developing small and midsize hospitals swayed their decision. “When I look at our two suitors, I see one that will be new to the area and will have invested a great deal of money in the future of this hospital,” Commissioner Pat Card said. “It is in their best financial interest to be very aggressive in developing this network of referral physicians because their profit margin depends on the future viability of this facility.” Card said he feared Halifax Health would transform Bert Fish into a referral hospital that would transfer patients from Southeast Volusia to the hospital system's main campus in Daytona Beach. Commissioners Ferd Heeb, Derwin Smothers and Tom DeSimone joined Card in supporting HMA. Commissioners Pat Corbett and Joe Benedict cast the dissenting votes. If chosen, HMA is proposing an upfront $50 million lump sum lease payment and $40 million in improvements to Bert Fish Medical Center over the next 10 years. The company also says it will keep the district's existing charity care policy and maintain staff at the same level of pay. The hospital would be run by HMA with input from an advisory board that the company says would not be subject to the Sunshine Law, which requires the public's business be conducted in open sessions. HMA says it would need the same level of taxes for seven years and then no longer need taxpayer support. Despite the outcome of Tuesday's vote, some commissioners, along with citizens and medical staff who addressed the board, expressed concerns about merging with HMA or Halifax Health. Every seat in Edgewater City Hall where the meeting took place was filled, and additional spectators lined the back of the meeting room. Speculation is mounting among stock market watchers that HMA itself might be the target of a takeover or merger. On Tuesday, the company's largest shareholder, Glenview Capital Management LLC, which is trying to increase its stake in HMA, said it is nominating eight candidates to shake up the company's current board. “For a decade, despite the best efforts of well-intentioned individuals at the company, HMA has fallen short in their financial returns to shareholders,” Glenview said in a letter to shareholders. HMA's CEO Gary Newsome recently announced he is stepping down July 31 to head a Mormon mission in Uruguay. The federal government is also reviewing company documents amid accusations that surfaced in a “60 Minutes” investigative report that HMA pressured doctors to improperly admit patients to pump up profits. HMA denies the accusations. Lawson said the company's interest in Bert Fish is strong and will not be affected by speculation of a takeover or a change in leadership. Troubles at Halifax Health also played into the board's vote. The federal government is asking for $350 million to $600 million in damages in a whistleblower suit alleging improper physician contracts and Medicare fraud. Halifax Health denies the allegations in the suit, which is set to go to trial in November. Benedict, chairman of the Southeast Volusia Hospital District Board of Commissioners, said he wanted to go back to the drawing board and examine all of the options because of issues with the hospital systems. “It's not a pleasant picture for the residents of Southeast Volusia,” said Benedict, who voted against negotiating with HMA. Commissioner Corbett also cast a dissenting vote, saying he wanted health care decisions to be made locally. Bert Fish's medical staff voted against merging with either HMA or Halifax, according to a letter sent to hospital commissioners. Dr. Charles Kollmer, chief of the medical staff, said he doesn't view the hospital as being in dire financial straits. Hospital commissioners painted the picture differently, saying Bert Fish needs a larger partner to provide it with the financial strength to expand in a rapidly changing health care landscape. Kollmer said the medical staff had reservations about both proposals similar to Benedict's. “Both of these appear to be quagmires,” Kollmer said. “Both of them have their problems. ... To jump from a potential fire into a definite fire doesn't make a lot of sense.” This is Bert Fish's second attempt at a merger. In 2010, a judge voided a merger with Florida Hospital on the grounds meetings were conducted in secret.